Timing is Everything
Below are essential estate planning considerations to take into account during these unprecedented and uncertain times, as well as some critical steps for wealthy individuals to take in anticipation of the November election.
ESSENTIAL ESTATE PLANNING DOCUMENTS TO GET IN PLACE NOW
Normally, facing mortality and the difficult decisions that come with it serve as hurdles that must be overcome in order to even begin planning an individual's estate. However, these days, coronavirus presents an imminent threat, which is impossible to ignore. Accordingly, individuals should be proactive and get their essential planning documents in place in order to protect themselves, their loved ones and their assets.
There are a number of essential documents that every adult needs to have in place in the event of his or her incapacity or death. These documents, together, provide a basic foundation for any estate plan - what we like to call “phase one” of estate planning.
The first set of documents is a Last Will and Testament and/or revocable trust. One of the most effective ways to direct the distribution of your assets upon your death is to create a Will or revocable trust. A properly drafted Will or revocable trust instructs how your assets are to be distributed upon your death; designates an Executor or Trustee who is responsible for marshaling your assets, preserving your estate paying creditors, administrative expenses and death taxes, and disposing of the remainder of your property among your beneficiaries; appoints Guardians for minor children; establishes trusts for asset protection and estate tax planning purposes; and in the case of a revocable trust, avoids probate upon your death.
The second document is a power of attorney. A power of attorney allows you to appoint an individual to handle financial decisions for you, including paying your bills and taxes and managing your investments and business. A springing power of attorney enables your agent to act only following your incapacity or incompetence, while a durable power of attorney allows your agent to act immediately. When coronavirus symptoms become acute, one common treatment requires intubation. That process can require inducing a coma until the patient can begin breathing on his or her own, resulting in a period of incapacitation that prevents patients from making financial decisions. It is particularly advisable for individuals to prepare for this type of scenario by authorizing someone to act as their agent while they are incapacitated by means of a power of attorney.
The third essential estate planning document is a health care proxy. The health care proxy is used to appoint an individual to make medical decisions for you, in the event that you are unable to do so yourself.
Finally, there is the living will. A living will is used to express your wishes regarding your healthcare in the event that you have a terminal condition or are in a vegetative state, and may be used to evidence your intention to have artificial life support terminated.
If you already have living wills, “do not resuscitate” orders (DNRs) and health care proxies in place, especially standard forms that have been signed and obtained online or elsewhere, they should be reviewed, as they may contain language that could be completely contrary to what you might wish to have done from a treatment standpoint during the coronavirus pandemic. For instance, some of these documents may prohibit intubation under all circumstances. Many people who sign these forms picture an extended stay in a hospital, connected to a bunch of tubes, being artificially kept alive. However, if you are not presently in a terminal condition and contract coronavirus, since it is a respiratory tract infection, it is possible that you would need to be intubated in order to survive it.
If you have basic estate planning needs, please visit www.remoteestateplan.com to choose a plan that would work best for you.
If you have complex planning needs or significant assets, please contact us at email@example.com to discuss a plan that would work best for you.
SOPHISTICATED ESTATE PLANNING TECHNIQUES TO EMPLOY BEFORE THE NOVEMBER ELECTION
For individuals of significant wealth, once your primary estate planning documents are in place, you're ready for what we call "phase two" of estate planning.
For 2020, the lifetime federal gift and estate tax exemption has been increased to $11.58 million per person. The federal estate and gift tax rates are 40%. This increased exemption amount is scheduled to sunset at the end of 2025 and return to $5 million (adjusted for inflation), assuming that it is not sooner reduced in the event that Biden takes office next year. In fact, Biden recently proposed accelerating the reinstatement of the exemption amount to $5 million (adjusted for inflation). Additionally, with the recent passage of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), and with more stimulus bills to come, Congress may soon look for ways to reduce these deficits. This will undoubtedly lead to discussions about further reducing the exemption amount and increasing the federal estate tax rate. Importantly, these anticipated changes may go into effect as soon as January 1, 2021, as legislation can be passed that would be retroactive to that date.
We are strongly advising clients with estates in excess of $3.5 million to consider taking advantage now of this use it or lose it opportunity. While all of the turmoil in the world has created a strong level of uncertainty, it has also created excellent opportunities for estate planning as a result of the combination of the increased exemption amount, depressed asset values and low interest rates. Taking advantage of these opportunities will require immediate action, as the estate planning techniques involved typically require not only consultation with your attorney, but also advice from your accounting and financial advisors and preparation of appraisals, transfer or retitling of assets and opening of new accounts. Sophisticated estate planning takes time to complete, and delay could mean the loss of significant tax planning opportunities.
Please contact us at firstname.lastname@example.org to take action without delay.